The single biggest reason why start-ups succeed | Bill Gross

The single biggest reason why start-ups succeed | Bill Gross


I’m really excited to share with you some findings that really surprise me about what makes companies
succeed the most, what factors actually matter the most
for startup success. I believe that the startup organization is one of the greatest forms
to make the world a better place. If you take a group of people
with the right equity incentives and organize them in a startup, you can unlock human potential
in a way never before possible. You get them to achieve
unbelievable things. But if the startup
organization is so great, why do so many fail? That’s what I wanted to find out. I wanted to find out what
actually matters most for startup success. And I wanted to try
to be systematic about it, avoid some of my instincts
and maybe misperceptions I have from so many companies
I’ve seen over the years. I wanted to know this because I’ve been starting businesses
since I was 12 years old when I sold candy at the bus stop
in junior high school, to high school, when I made
solar energy devices, to college, when I made loudspeakers. And when I graduated from college,
I started software companies. And 20 years ago,
I started Idealab, and in the last 20 years,
we started more than 100 companies, many successes, and many big failures. We learned a lot from those failures. So I tried to look across what factors accounted the most for company
success and failure. So I looked at these five. First, the idea. I used to think that
the idea was everything. I named my company Idealab
for how much I worship the “aha!” moment when you first
come up with the idea. But then over time, I came to think that maybe the team,
the execution, adaptability, that mattered even more than the idea. I never thought I’d be quoting
boxer Mike Tyson on the TED stage, but he once said, “Everybody has a plan, until they get
punched in the face.” (Laughter) And I think that’s so true
about business as well. So much about a team’s execution is its ability to adapt to getting punched
in the face by the customer. The customer is the true reality. And that’s why I came to think that the team maybe
was the most important thing. Then I started looking
at the business model. Does the company have a very clear path
generating customer revenues? That started rising to the top
in my thinking about maybe what mattered
most for success. Then I looked at the funding. Sometimes companies received
intense amounts of funding. Maybe that’s the most important thing? And then of course,
the timing. Is the idea way too early and
the world’s not ready for it? Is it early, as in, you’re in advance
and you have to educate the world? Is it just right? Or is it too late, and there’s
already too many competitors? So I tried to look very carefully
at these five factors across many companies. And I looked across all 100
Idealab companies, and 100 non-Idealab companies to try and come up with
something scientific about it. So first, on these Idealab companies, the top five companies — Citysearch, CarsDirect, GoTo,
NetZero, Tickets.com — those all became billion-dollar successes. And the five companies on the bottom — Z.com, Insider Pages, MyLife,
Desktop Factory, Peoplelink — we all had high hopes for,
but didn’t succeed. So I tried to rank across all
of those attributes how I felt those companies scored
on each of those dimensions. And then for non-Idealab companies,
I looked at wild successes, like Airbnb and Instagram and Uber
and Youtube and LinkedIn. And some failures: Webvan, Kozmo, Pets.com Flooz and Friendster. The bottom companies had intense funding, they even had business models
in some cases, but they didn’t succeed. I tried to look at what factors
actually accounted the most for success and failure across
all of these companies, and the results really surprised me. The number one thing was timing. Timing accounted for 42 percent of the difference
between success and failure. Team and execution came in second, and the idea, the differentiability of the idea,
the uniqueness of the idea, that actually came in third. Now, this isn’t absolutely definitive, it’s not to say that
the idea isn’t important, but it very much surprised me that
the idea wasn’t the most important thing. Sometimes it mattered more when
it was actually timed. The last two, business model and funding,
made sense to me actually. I think business model
makes sense to be that low because you can start out
without a business model and add one later if your customers
are demanding what you’re creating. And funding, I think as well, if you’re underfunded at first
but you’re gaining traction, especially in today’s age, it’s very, very easy to get
intense funding. So now let me give you some specific
examples about each of these. So take a wild success like Airbnb
that everybody knows about. Well, that company was famously
passed on by many smart investors because people thought, “No one’s going to rent out a space
in their home to a stranger.” Of course, people proved that wrong. But one of the reasons it succeeded, aside from a good business model,
a good idea, great execution, is the timing. That company came out
right during the height of the recession when people really needed extra money, and that maybe helped people overcome their objection to renting out
their own home to a stranger. Same thing with Uber. Uber came out, incredible company,
incredible business model, great execution, too. But the timing was so perfect for their need to get drivers
into the system. Drivers were looking for extra money;
it was very, very important. Some of our early successes, Citysearch,
came out when people needed web pages. GoTo.com, which we announced
actually at TED in 1998, was when companies were looking for
cost-effective ways to get traffic. We thought the idea was so great, but actually, the timing was probably
maybe more important. And then some of our failures. We started a company called Z.com,
it was an online entertainment company. We were so excited about it — we raised enough money,
we had a great business model, we even signed incredibly great
Hollywood talent to join the company. But broadband penetration
was too low in 1999-2000. It was too hard to watch
video content online, you had to put codecs in your browser
and do all this stuff, and the company eventually
went out of business in 2003. Just two years later, when the codec problem
was solved by Adobe Flash and when broadband penetration
crossed 50 percent in America, YouTube was perfectly timed. Great idea, but unbelievable timing. In fact, YouTube didn’t even have
a business model when it first started. It wasn’t even certain that
that would work out. But that was beautifully,
beautifully timed. So what I would say, in summary, is execution definitely matters a lot. The idea matters a lot. But timing might matter even more. And the best way to really assess timing is to really look at whether
consumers are really ready for what you have to offer them. And to be really, really honest about it, not be in denial about
any results that you see, because if you have something you love,
you want to push it forward, but you have to be very, very honest
about that factor on timing. As I said earlier, I think startups can change the world
and make the world a better place. I hope some of these insights can maybe help you
have a slightly higher success ratio, and thus make something great
come to the world that wouldn’t have happened otherwise. Thank you very much,
you’ve been a great audience. (Applause)

98 comments

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  3. Timing is everything. GE failed in it's eco-light buld back in the 90's because it was just too early.

  4. Did he really analyze his own subjective scoring and call it the biggest reason why start-ups succeed? I'm sorry but that's not very scientific for me. How do you know the scoring was not skewed/biased?

  5. интересно читать комментарии людей! тут не вижу сквернословия как это заметно на российских сайтах

  6. I only need advertisement. And it's so highly priced, I can't afford to put it out yet to use. I think when we look into things we will find our own people are why we are going broke in America. Greedy people controlling everyone who refuse to pay them to make it. It's messed up I tell ya.

  7. I call bullshit on this. There are more companies who made their own timeline than the those who've launched when the "time" was right. There are more of those who made the time work for their business than those who couldn't. Your "scientific" conclusion doesn't necessarily jell so well with history, my friend! Try better next time!

  8. I challenge your assertions:
    Although logical for companies like Youtube or Uber the concept has significant holes in it. Example #1: I discover that, hypothetically, combining these four medications cures all cancer… "a World's first…" the sequencing becomes: Idea, team, business model, funding finally timing. Next example: I anticipate food shortages coming in our lifetime, I start a "think tank" to grow food indoors hydroponically: the order is: Business model, funding, team, idea and finally timing. Third example: Elon wants to capture NASA'S space launch for the foreseeable future: Elon need: Funding, team, business model, idea, timing.

    Please challenge my logic here… the scenarios you propose are only a percentage of the critical order necessary for a successful startup.

  9. Doesn't anybody question that he ranked all these attributes across companies based upon how we "felt" about them? Not very scientific. Maybe some accurate insight, but he could be COMPLETELY wrong when using real data…

  10. Idea is overvalued. Manyboridnay people can have great ideas. But if you don't know how toe xceute. And fidnt the team and talent to pursue it. That's all it will ever be. He doesn't know how many people have ahad the same idea as these companies. But did nothing substantial with them so its a flawed methodology.

  11. Hands down the most informative ted talk ever . Great content. I would love to hear more from this speaker

  12. Either government funding and investment bank funding. Google, Amazon, Facebook, Netflix all these new Globalist tech companies exist as crown corporations on steroids. All have massive govt funding, tax breaks or no tax to pay at all (full concessions). If you are a propoganda tool (media), spy tool (big data social) you will be just fine regardless of financials. The core business of Amazon has never made money and never will. So, work with government, give them what they want and they give you junk cash from the printing press and off you go.

  13. Thanks for sharing your entrepreneurship stories! As a fellow entrepreneur, this talk really resonated.

  14. One thing that made me skeptical about this theory is that the reasoning came after knowing whether company succeed/failed. It is easy to interpret or reason about why companies succeed/failed and it can sometimes be misleading. If AirBnB were not successful today, we would have perhaps said “well the recession meant that welcoming a stranger to come into your house to steal your stuff would not be a smart thing to do!”

  15. The speaker summarized 5 factors that can decide whether a startup can succeed or not. His conclusion is that timing matters 40%, then team execution comes to the second place, then good ideas. Business model and enough funding also matters but come to the 4th and 5th positions.

  16. One thing that stood out was the “name and design of their label”. The ones that worked out “looked cool, sounds cooler, =more appealing visually and to the ears” majorities of humans are really that SIMPLE!

  17. I think the statement is : come with inexistant,viable idea that add new value in the appropriate time.

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  19. Would you guys from USA consider online sports betting with starting bankroll of 10000 $ as a legit start up business? What is overall opinion in USA about sports betting? I am from Germany but I would appreciate your perspective.

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  21. 2:45 He tried to come up with a "scientific way to analyze it", but
    3:05 He tries to rank those companies by those attributes on "how he felt" (subjective)

    There's nothing scientific about his analysis. In fact, it's circular logic and post hoc sophistry – "this company succeeded so the timing must've been right".

    .He seems like a genuine and nice guy but I wouldn't take much away from this.

  22. Its great to unlearn the nonsense that many business programs teach, yes the TIMING makes sense, but you are forgetting the most important fact, its not just TIMING, but PLACE (but also probability / luck). If you are in a 3rd world country or a non ideal demographic and structural environment then many profit based non-subsidized business missions are not going to succeed as much as in other environments that are in more capitalistic environments, culturally, and structurally healthy and have excellent demographic properties in order to nurture, grow and sustain business ideas. 😉 Cheers

  23. Airbnb and Uber are great for making money. Not such a great business when you look at the effects on community, people, everything else that matters…

  24. I am currently 15 years old working on a startup that hopefully goes well – Daniel Urmanov Wessling 2019

  25. I don’t know if timing is the right word. Research your customers properly and make sure your product / service is really what customers want.

  26. I opened my LLC start-up in the United States using delawarefile.com. I would recommend to anyone who wishes to enter the US market.

  27. What many of you fail to realize is that if you don't have money to start a startup then your fucked. Most startups these days average $20k just to start, or all of your time. Either is going to give, and usually, it requires all of your time and money.

  28. I run a business, it involves creating business plans for people to include market research and financial forecasting. If anyone needs one done Id be happy to help

  29. Probably the most wholesome and thought-provoking content I have come across all week. Thoroughly enjoyed this video.

  30. Rich people have rose colored lens, he is looking at it from his class. Yes in his class funding and business model don’t count. For the rest of us normal folks it is a different game. In reality this is how it works:
    1. Connections (family, social class, race included) – as George Carlin says “it’s a big club but you’re not in it”. You or me will not be able to create an Uber or Airbnb as the regulations of taxi and hotel services will apply to us but for the exceptional class with government connections that is a different story.
    2. Funding – without number 1, not getting to number 2
    3. Founder / VC / advisor – are there psychopaths in this group? What is the real motivation to building the product? What is everyone’s motivation to be part of this startup?
    4. Team – need number 2 to build it, no employee will work for free
    5. Market fit – is there a market for the idea?
    6. Product – is the product easy to use or does it even work or exist?
    7. Environment / market conditions (timing) – technically if you have a lot of 2 then you can possibly wait it out to hit this. Sometimes you may target a particular country or society that has the elements you are looking for.

  31. so amazing. I watched this talk several years ago, and learned so much. I just watched it again, and learned even more . Thank you Bill Gross 🙂

  32. All the companies he mentioned are basically software companies. So if you know how to code you can start these companies with just a laptop. You don’t need to invest in any inventory. You can test it out without having spent a lot of money and see if it gets traction.

  33. I partially agree with him. What matters is finding the needs of users first and creating a solution which targets it head on. Unless we build something that is actually needed no one is going to buy it

  34. Well executed TED talk, but way too superficial to take away any useful (and new) insight. A quick look at the study's findings would be interesting but unfortunately there is no link provided here.

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  36. Any academic can rip this talk apart.
    For one Saying timing is more important is almost the same as saying 'chance' is.
    His analysis is retrospective too, and hindsight suffers from bias
    And so on
    Thanks

  37. Timing, right timing is the core of success. A good idea at a wrong time will fail, a bad idea at the right time even without funding, team and business model shall succeed.

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